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Eighteen(18)-year old witch Marnie Cromwell-Piper (Sara Paxton) and her brother Dylan (Joey Zimmerman) are off to Witch University in Halloweentown, not knowing that there's a prophecy to be fulfilled and that it involves a Cromwell.
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Halloweentown exists in an alternate space and time. At one time, the current residents of Halloweentown -- witches, ghosts, and monsters of all sorts -- lived in what they call "the mortal world". Due to the persecution they suffered at the hands of mortals for being different, they left the mortal world and created their own community 1,000 years ago. Travel between the two worlds was once restricted to a portal that opened only on Halloween, but Marnie created a permanent portal in Halloweentown High.
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Halloweentown High ends on Halloween when Marnie is still in high school. Return to Halloweentown begins with Marnie returning to Halloweentown to start her freshman year at Witch University, so it's most likely that almost one year has passed.
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At first, Marnie is led to believe that he simply promised their mom to help her move to Witch U. Later, it is revealed that Gwen has also made Dylan enroll at Witch U in order to keep his eye on Marnie. Although Dylan is younger than Marnie, he admits that he used magic to speed read when he was in school, which resulted in his skipping a grade.
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At the beginning of the movie, it says that Sophie is staying with Grandma Aggie and training to become a witch. When Aggie comes to visit Marnie at her dorm, Aggie mentions that Sophie is off touring the galaxy with some little green docents (guides).
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The prophesy, as read by Silas Sinister (Keone Young), says: 'And it shall come to pass, at the close of the first Millenium, at the rise of the Halloween Moon, a Cromwell of Great Power will embrace The Gift. And all the World will find peace under Her Dominion.' In his own words, Silas adds: 'Marnie Piper is the Cromwell of the prophesy, the one we have waited for.'
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The Gift is an amulet of Absolute Control. With it, a Cromwell can will anyone to do anything, to control hearts and minds. Unfortunately, the Dominion, which consists of Silas Sinister, Chancellor Lwaxana Goodwyn (Leslie Wing), Dr Ichabod Grogg (Scott Stevensen), and other maleficents, want to use Marnie and the amulet to obtain absolute power over Halloweentown and to make slaves of all its residents.
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Marnie returns from the past on Halloween with the key to the Cromwell box. No sooner does she open the box and remove the amulet than Chancellor Goodwyn steals it from her. To insure Marnie's cooperation to the Dominion, the three Sinister sisters -- Scarlett (Kristy Wu), Sage (Katie Cockrell), and Sapphire (Kellie Cockrell) -- turn Dylan into a dog, the form in which he will remain forever unless he is turned back into himself before Halloween passes. Consequently, Marnie agrees to cooperate and goes off with Aneesa (Summer Bishil) to get ready for her coronation as Queen of Halloweentown. Minutes before midnight, Marnie, Goodwyn, Grogg, and Silas Sinister step out on the balcony together. Marnie insists that, before she will receive The Gift, they must return Dylan to his natural form, which they do. Goodwyn then places the amulet on Marnie's neck and orders her to cast the spell that will make them rulers of Halloweentown. Marnie casts a spell on Gwen and Dylan, ordering them to do her bidding. She then orders Aneesa to transport the amulet into her lamp and toss it into the air. While the three faculty members gasp in horror, the three Cromwells destroy the lamp. Beaten at their game, Goodwyn, Grogg, and Sinister are stripped of their magic powers and arrested for treason by Professor Persimmon Periwinkle (Millicent Martin), who reveals herself to be an undercover agent for the Halloweentown and High Dominion League. Along with their father, the three Sinister sisters are also stripped of their magic. Impressed that Marnie gave up the amulet, Ethan (Lucas Grabeel) confesses that he also renounced his powers and is now a mere human again. In the final scene, Dylan is studying in his room. He opens a book only to find the amulet hidden within some cut out pages. 'Oh, boy,' he says, closes the book over the amulet, and returns it to the shelf.
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